Federal officials say New Jersey must repay $271M for scrapped rail tunnel under Hudson River

TRENTON, N.J. (AP) — The Federal Transit Administration has determined that New Jersey must repay the federal government the entire $271 million it spent on early design and construction work for a New Jersey-New York train tunnel that Gov. Chris Christie scrapped.

U.S. Transportation Secretary Ray LaHood announced the final decision Friday in a letter to New Jersey's congressional delegation and in a 52-page report sent to the Christie administration from the FTA's Budget and Policy office. The Associated Press obtained copies of both documents.

Christie, a Republican who has gained national attention for his budget-cutting ways, abandoned the project last fall over what he said were escalating costs. He cited potential overruns of $2 billion to $5 billion, which he said the state couldn't afford. He then hired a high-powered Washington law firm to fight the debt the federal government said was owed for work already completed. The administration has spent more than $800,000 in legal fees.

The $8.7 billion tunnel was the most expensive public works project in the country when Christie spiked it. It would have doubled the capacity for trains traveling between New York City and New Jersey, routes that are now close to capacity and frequently delayed.

In the letter, LaHood called Christie's decision to cancel the tunnel unfortunate. He said Christie and leaders at the state's mass transit agency willfully broke the contract for the tunnel. LaHood says the cost range was known since 2008.

Interest on the debt began accruing Friday, according to the Department of Transportation. "The taxpayers acting through FTA, committed more than $1 billion to NJ Transit, in exchange for which NJ Transit was committed to build a defined transit improvement for the benefit of the American people," LaHood wrote in his letter to the delegation.

LaHood said he tried to salvage the project after Christie killed it initially, traveling to New Jersey twice to meet with the first-term governor. "The purpose of my efforts was to avoid the very circumstance in which we now find ourselves: No jobs, no congestion relief and an enduring debt whereby New Jersey must return $271 million to the nation's taxpayers," he wrote.

Christie has since embraced two possible alternatives, neither of which are nearly as far along as the canceled project: extending the No. 7 subway line into New Jersey from New York and having Amtrak take the lead in building a second rail tunnel under the Hudson River ending at Penn Station. The scrapped tunnel would have ended north of New York's Penn Station, which serves Amtrak in addition to Long Island Rail Road and NJ Transit commuter trains. The proposed tunnel would connect directly to new tracks at Penn Station rather than end far beneath the Macy's store at West 34th Street.

LaHood said that he would not seek to withhold federal funds from other programs to recoup the debt because of the poor economic conditions facing the state.

"I am not pursuing these collection methods at this time in the hope that we and the state of New Jersey can develop a workable payment schedule that will result in the least harm to New Jersey residents," LaHood wrote. "After the initial contract was entered into and later expanded at Gov. Christie's request, the state of New Jersey broke the terms of the contract."

Christie's office said it was reviewing the decision and had not yet determined what its next step would be.

"We disagree with the FTA's conclusion and its continued efforts to bill New Jersey taxpayers for completed work that will be of substantial value to future transportation projects not just in New Jersey, but in the Northeast corridor," spokesman Kevin Roberts said.

Sens. Frank Lautenberg and Robert Menendez, both Democrats, lamented the decision.

"We worked hard to get the parties to negotiate a fair resolution of this conflict," they said. "However the state's outside lawyers pursued an all or nothing approach, which brings substantial risk to New Jersey taxpayers."